NEW YORK (Reuters) -U.S. companies are removing their CEOs at the fastest clip in two decades, data shows, as increased scrutiny from shareholders and boards result in reduced tolerance for sub-par returns or wayward conduct.
At least 41 CEOs have exited S&P 500 companies so far this year, compared with 49 for all of 2024 – making the fastest pace on an annualized basis since 2005, according to data from nonprofit executive research group The Conference Board and data analytics company ESGAUGE.
In the latest example, consumer goods company Procter & Gamble, the maker of Tide laundry detergent and Bounty paper towels, said on Monday CEO Jon Moeller will be replaced next year by longtime executive Shailesh Jejurikar. Moeller, who has been CEO since 2021, will become executive chairman, a powerful role on the board that allows the former chief to retain a strong voice in company affairs.
Before that in the last three weeks alone Tylenol-maker Kenvue replaced its CEO and health care products distributor Henry Schein said its CEO will leave at year’s end.
In interviews, more than a dozen executive recruiters, investors, bankers, lawyers and industry advisers attributed the high turnover this year to a range of reasons, some building up from economic and social changes since the Covid-19 pandemic.
While high inflation, geopolitical instability and the Trump administration’s trade war has complicated the job of CEOs, diversity gains made boards more independent and demanding of the person in the top job, these people said.
At the same time, in a stock market setting new records but driven mostly by large tech names, underperformance had given activist investors, who push for corporate changes from selling a division to buying back more stock, greater sway, leading to management changes.
“Trying to fire the CEO has become a referendum on what’s perceived to be a failed company strategy,” said Peter da Silva Vint, managing partner at consulting firm Jasper Street, which works with companies facing pressure from activist investors. “And investors have become more comfortable with it as a mechanism to send a message.”
CEOs at companies that are lagging their peers are most at risk for demands from activists, with almost half – 42% – of S&P 500 companies that changed leaders last year foundering in the bottom 25th percentile for total shareholder returns, according to a November study led by The Conference Board.
Take the case of Kenvue, where the board said it was replacing CEO Thibaut Mongon “to unlock shareholder value and reach its full potential” after the stock had lost 16.5% since its spin out from Johnson & Johnson two years ago. In contrast the S&P 500 has climbed 41% since August 2023, when Kenvue became a fully independent company.
